Building on the successful program of tax-lien securitizations it pioneered, New York City is gearing up for another innovative debt sale with the first tax lien resecuritization, according to Adam Barsky, director of the city's office of operations.

Barsky said the bonds will likely be offered in August. The city is working with Morgan Stanley Dean Witter on structuring the offering, which should come in at about $50 million.

Collateral for the resecuritization will be the residual interest after the original securitization is fully paid, Barsky explained. He said that there is a lot more revenue to be collected from these pools than is needed to pay them off.

Even after the loans are repaid, the properties continue to accrue tax liability and interest at the rate of 18% per annum on any unpaid balances. In the event of non-payment, the city can also put the property up for auction and the value of the property can often be more than five times the unpaid liens.

According to Barsky, the lien to property value ratio is less than 20% of total pool collateral.

Separately, he said, the city is also in the process of preparing another property tax lien securitization, possibly during July. Barsky said this issue will probably weigh in at between $50 million and $100 million. Bear Stearns is working with the city on structuring that deal.

The asset-backed deal will resemble others the city has done, he noted. They will be multi-tranched with roughly a two- to three-year life cycle. Ratings will likely vary with the tranche. Prior issues have priced at about 45 basis points over two-year Treasurys, he added.

Although New York City arranges for its own tax lien securitizations, several private companies have entered the fray, purchasing liens from cities to set up their own securitization trusts.

Also out with a new tax lien issue is Arlington, Va.'s TaxServ. The company announced it has acquired a portfolio of delinquent tax accounts with a face value of $10 million from a number of municipalities on the East Coast. It said it intends to keep building up the acquisition side of the business and be in a position to float a $100 million to $150 million tax-lien securitization within a year.

TaxServ had been primarily a third party servicer of tax liens on behalf of municipal clients. - David Feldheim

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